Dual blow flattens PowderJect

DRUGS supplier PowderJect Pharmaceuticals suffered a double blow when its shares tumbled on a profit warning and a top City analyst warned investors to steer clear of the company.

The FTSE 250-listed shares were down more than 23%, or 99 1/2p, to 324 1/2p following the firm's recall of millions of its tuberculosis (BCG) vaccines. The company said the recall would knock about £5m off expected profits of about £25m this financial year.

Investment bank Goldman Sachs downgraded the company from 'market perform' to 'market underperform' and said it was reviewing its forecasts. In a note to clients, the bank advised would-be investors to 'hold fire until the dust has settled on manufacturing'.

Robin Campbell, an analyst at WestLB Panmure, described the recall problems as 'a disappointment' but said the company's other drugs were still selling well. He trimmed his profit forecast from £27m to £22m. In its announcement, PowderJect said it still expected to hit its revenue target of £160m for the year ending March 2003.

PowderJect won its £17m two-year BCG contract from the Department of Health last year. The vaccine is given to all schoolchildren aged between 10 and 14 and to unvaccinated travellers to and visitors from high-risk countries. The programme has been suspended while a new source is found.

PowderJect attempted to limit the damage by insisting the manufacture of BCG jabs at its plant in Speke on Merseyside was 'totally unrelated' to output of any other products. The problems were uncovered during routine testing of stored batches destined for Ireland. These failed 'end of shelf-life' specifications on potency, leading to wider testing. Some batches of UK vaccines also failed the tests.

The company has rarely been out of the headlines since it emerged in April that PowderJect had been awarded a £32m Government contract for smallpox vaccine. It subsequently emerged that chairman and chief executive Paul Drayson gave £50,000 to the Labour Party in July last year and a further £50,000 in December.

Shares in rival Acambis were among the early risers on investor hopes that it could benefit from PowderJect's problems.